The title of today’s blog echoes the influential book, Wealth and Democracy: A Political History of the American Rich, published by the American political commentator Kevin Phillips in 2002. It’s a great book.
Among other things, Philips came up with a way to quantify the dynamics of economic inequality for historical eras for which we lack detailed data on distributions of wealth or income. He suggested that a good index is simply the size of the largest fortune scaled by the median household wealth or income. I have used the same approach in investigating cycles of economic inequality in the Ancient Rome, early modern England and France, and in modern America. (See my blog on the double helix of inequality and well-being, as an example).
Philips also argued that wealth and governance are closely connected. Large fortunes come from the “power and preferment of government.” In return, wealth-holders have a disproportionate effect on government policy, even in democracies. In fact, as economic inequality becomes more extreme, the government becomes much more responsive to the rich. This thesis was recently supported by the empirical research of Martin Gilens (see his book, Affluence and Influence: Economic Inequality and Political Power in America).
In a similar vein, I have also written on how economic inequality can serve as an indicator of elite overproduction, which leads to growing intraelite competition, unraveling of social cooperation among the elites, as well as between the elites and the rest of the population, and may ultimately result in an outbreak of serious political violence. (See the previous blog for links to these posts)
These ideas have been much on my mind as I watch the unfolding crisis in Ukraine, which has already lead to the state collapse there and now possible territorial fragmentation (it appears that the defection of Crimea to Russia is rapidly becoming irreversible, see here). Much has been written about Ukraine recently, focusing on the personalities of leaders such as the deposed president Yanukovich and, particularly, on the centrifugal forces tearing Ukraine apart, with a large part of population (in the West) attracted to Europe, while an equally large part (in the East) attracted to Russia.
But what I am interested in is the deeper dynamic—structural-demographic forces underlying the latest Ukrainian revolution. My analysis shares many points with what Jack Goldstone, the father of structural-demographic theory, has recently written in his blog (see, in particular, Angry Protests of the Middle Classes on Ukraine and other “cross-road countries,” and Back to the Future at Forbes? on America).
The key question is: how is social power structured in Ukraine? And who are the primary power-holders? Following Michael Mann, we can classify the sources of social power into four categories: coercion/military, economic, administrative/political, and ideological/religion. Interestingly enough, ruling elites in different societies tend to specialize in different sources of power. Thus, Egypt is traditionally ruled by generals (from Nasser to Sadat and Mubarak, and now Al-Sisi), China and France are dominated by bureaucracies, the United States – by economic elites (see Bill Domhoff’s Who Rules America?), and Iran by ideological elites (the ayatollahs have the final say). And Ukraine? Without doubt, it’s the economic elites.
Although protests in Kiev were triggered by the decision of Yanukovich government to turn away from the association agreement with the European Union in favor of closer integration with Russia, the motivations of protesters quickly shifted to a general rejection of the oligarch-dominated policies of Yanukovich’s Party of Regions. It is generally believed that the main financier and the real leader of Party of Regions is Rinat Akhmetov, the richest Ukrainian oligarch (with Forbes-estimated fortune of $12.5 billion).
President Viktor Yanukovych (foreground, second from left) and Ukrainian billionaire Rinat Akhmetov (to Yanukovych’s left) gather with supporters at the Party of Regions convention in 2009. (Yaroslav Debelyi) Source
It would be nice if we could point an accusing finger at the Party of Regions as the only corrupt, oligarch-dominated element in Ukrainian politics. Unfortunately, other parties are no better. All Ukrainian politics is thoroughly dominated by billionaire oligarchs. The second richest man in Ukraine, Victor Pinchuk, is married to Olena Pinchuk, the daughter of former President of Ukraine Leonid Kuchma.
Viktor Pinchuk, Leonid Kuchma, Bill Clinton, and Olena Pinchuk (Source)
The main party that was in opposition to Yanukovich, the Fatherland Party, is lead by the fiery Yulia Tymoshenko, sporting her customary braid. Tymoshenko herself is an oligarch, worth probably close to $1 billion. She is commonly known as the “Gas Princess,” because she made her fortune in the gas industry during the chaotic 1990s. Tymoshenko has been the Prime Minister until 2010, and she has a good shot at the Ukrainian presidency in the elections scheduled for May 2014.
Another potential candidate, who has a good chance of winning presidential elections, is Petro Poroshenko, the number 7 in the Forbes’s list of Ukranian billionaires (estimated fortune: $1.3 billion).
When the corrupt Yanukovych government fell, the Maidan protesters (Maidan is the central square of Kiev, which became the symbol of the Ukrainian revolution – actually, both of them – the Orange one in 2005 and the current one) declared that they don’t want to return to the old oligarch-dominated politics. But the protesters wishes were ignored by the new rulers of Ukraine. The acting president, Oleksander Turchynov, and the prime minister, Arseniy Yatsenyuk, are both long-standing members of Tymoshenko’s Fatherland party. Turchynov began his political life in close association with Serhiy Tihipko (number 9 on the Forbes list of Ukrainian billionaires) and with the same Leonid Kuchma, the Ukrainian president from 1994 to 2005. No wonder the Maidan protesters objected to Turchynov elevation – in vain.
“This new bunch of leaders we’ve got are just the same as the last ones, and the ones before that. … We’re staying put till we get what we want,” said a Maidan protester.
Perhaps the most striking evidence of the domination of the Ukrainian state by the wealthy oligarchs is the appointment by the newly installed government in Kiev of two billionaires, Ihor Kolomoysky and Serhiy Taruta, as governors in Dnepropetrovsk and Donetsk.
An investigation into Ukrainian power structures leads one to a depressing conclusion: all power holders are either billionaire oligarchs themselves, or are merely oligarch stooges.